As museums begin to embrace NFTs, they face new opportunities — and risks

Non-fungible tokens have the potential to be a new medium for artists to explore and monetize their work, just as art forms have shifted and changed throughout history, according to a Toronto-based curator.

NFTs are a type of digital asset and are typically used to buy and sell virtual artwork using cryptocurrency. Each NFT has a uniquely identifiable token, and its ownership can be traced through a ledger known as the blockchain.

Art from the Bored Ape Yacht Club collection, which features 10,000 unique NFTs, has sold for hundreds of thousands of dollars.

Claudia Lala, curator and founder of LALAContemporary — a Toronto gallery that hosted its first NFT art show last year — says she sees them as a "new language" in the art world that shouldn't be ignored.

"We respect [artists] once they're gone or once, you know, the history legitimizes them," she told CBC Radio's Day 6.

"Art basically evolves because of the ideas that are being broken by the new artists and the new movements, and so I believe this is one."

The cryptoassets have faced criticism, however, with some calling them a "scam." Artists have accused collections of selling their artwork as NFTs without permission, and the cryptocurrency that powers them draw heavily on energy resources, so they have a significant environmental footprint.

Still, a handful of galleries across Canada have embraced NFTs, showing off the digital artwork they contain. A dedicated NFT museum also opened in Seattle last month. 

Meanwhile, major institutions are also getting in on the trend.

In September, the British Museum began selling more than 200 NFT postcards featuring works by Japanese artist Hokusai, partnering with a platform called LaCollection.

Dorian Batycka, a freelance art journalist, says the shift is a welcome change of pace for the often-staid art industry.

"The art world is in dire need of a shake up," said Batycka. "The art world tends to be very non-transparent based on cultural gatekeepers that have vested interests in maintaining a very opaque system in a very top-down, vertical, hierarchical way that seems impenetrable to many."

"And I think this is where perhaps NFTs can make a contribution."

But incorporating the art into collections hasn't been without challenges. A recent NFT purchase by the Institute for Contemporary Art Miami remained stuck in escrow last month as professional appraisers struggled to determine its value.

And last year, Germany's ZKM Centre for Art and Media lost access to two CryptoPunks — NFTs stored on the Ethereum blockchain — worth ETH 60 (currently more than $200,000) after a copy-and-paste error. 

Challenges for museums, institutions

Sean Stein Smith, assistant professor at Lehman College, part of the City University of New York, sees NFTs as a way to prevent forgeries and illegitimate copies that would dilute a work's value while offering the flexibility to share originals. 

"NFTs are good for the art community and they are good for artists and the content creators, but do pose a few complications and questions for any institutions, art galleries, museums trying to leverage the increase in interest in NFTs," said Stein Smith, who serves as a board member for the Wall Street Blockchain Alliance.

He says institutions should consider a couple key questions: Are they covered when it comes to buying and holding crypto assets? And do they have the staff and infrastructure to handle and store these works of art?

"Art collections, museums, galleries, curated collections are not always going to be the most innovative institutions — for good reasons," Stein Smith said.

It's not unheard of for crypto assets to be hacked, either. In early February, a security exploit resulted in the loss of cryptocurrency worth more than $320 million US, according to blockchain news website Coindesk. Decentralized finance research firm Elliptic estimates $10.5 billion US in cryptoassets were lost in 2021.

New York-based Appraisal Bureau is a company providing appraisal and insurance coverage of NFTs for institutions. New York Magazine reports that the company has also partnered with Malca Amit, a security company, to store the digital assets. 

An executive with the company told the magazine assets will be stored on disconnected hard drives in vaults alongside gold bullion and diamonds.

Despite the challenges, Mark Bland, a digital artist in Toronto whose work was shown at LALAContemporary, says it's hard to ignore the momentum behind NFTs in the art world right now.

"For a museum to get on board, it's not surprising to me whether it's just in a small way like postcards or eventually doing auctions or housing these pieces that become the historical elements of this time, this period," he said. 

Bland's solo show at LALAContemporary featured both prints of his collection, called Fractal Totems, as well as an immersive dark room experience of the animated work. He believes there's room for both mediums in the digital art world.

Lala says her gallery is expected to reopen next month with a new show. She remains committed to sharing NFTs as part of what she describes as her art "platform."

"We cannot be out of the idea of what is happening with the NFTs," she said. "I had this gut feeling that this was something that there was a need to show."

Written by Jason Vermes. Interview with Dorian Batycka produced by Glory Omotayo.